Maximising profit in the e-commerce boom

THE TURNSTILES ARE OPEN: IT’S TIME FOR INTEGRATED CONSUMER DATA INSIGHT TO LEAP JUMP ON BOARD THE RETAIL LOGISTICS MERRY-GO-ROUND, IN SUPPORT OF EVERY FUNCTION

The explosion of e-commerce in the last nine months is putting fulfilment networks under huge strain. The Covid pandemic has accelerated consumer behaviour by five years in just a few months.

Retail and logistics thinking needs to speed up to the same pace. That’s a tall order for systems, processes and strategies that have evolved gradually over a long period in separate business functions.

Because the pressure for change comes from consumers, the key is to apply historic and predictive consumer data to B2B systems. At the moment, that doesn’t happen consistently throughout the retail fulfilment cycle. Until now, comprehensive, integrated consumer and commercial data analytics have not been available for cross-functional use.

WHO OWNS CONSUMER DATA INSIGHT IN YOUR ORGANISATION?

Today, consumer data tends to reside within the retail and marketing team. It isn’t shared with decision-makers in logistics, supply chain and location planning. They plan their provision and services based on historic performance and their own forecasting models.

Traditionally, consumer data is used at the front end of the retail supply chain. Brands and stores analyse consumer needs and channel preferences to determine their ranges, product specification, pricing, channel mix, positioning and advertising messages. Customer data is readily available from epos and e-commerce tracking to inform procurement, product design and marketing.

Most successful retailers have a strong and established capability to use their own data, supplemented with external market research, to predict and meet consumer demand and trends. this means they can consistently source, stock and market the right goods in their physical and virtual shopfronts throughout the year.

That’s a big tick in the box for the retail, marketing, digital and store operations teams. But what happens next? The process of getting the goods to the customer is handled by the logistics and supply chain team. Do they have the same foresight into customer demand in terms of fulfilment, so the whole process is completed seamlessly for customers?

PROFIT IS A COLLECTIVE RESPONSIBILITY

Customer data staying in the retail silo has an impact on profitability. Procurement mark-up netted against retail operations costs may hit the profit target for products, categories and ranges. But fulfilment and logistics can cancel that out if stockholding isn’t optimised in the right locations or the pricing of universal consumer delivery methods is out of kilter with the real cost of supply.

The logistics team is also crucial in delivering an excellent end-to-end customer experience. Their work is often longer-term, because changing warehouse locations and bringing physical stores online is usually slower than specifying and sourcing a new consumer product.

This is an area where costs and efficiency are often harder to measure and understand as they build up across the operation. There’s a big opportunity to save money and improve performance with end-to-end analysis.

Defining consumer demand in different regions and types of logistics catchment is key for location planners to optimise the use of their existing sites and networks and to determine new store and depot locations.

The final mile has long been recognised as the most expensive part of the fulfilment process. But in fact, the final metre is even more critical. Understanding the exact nature of the address you’re delivering to makes a big impact on costs. The difference between a semi-detached house with easy parking on the driveway and a top floor flat on a red route can be ten minutes or more in courier time and efficiency.

UNDERSTANDING REGIONAL DIFFERENCES SUPPORTS FULFILMENT PROFIT AND EFFICIENCY

The same insights should influence the choices of delivery method that retailers offer to e-commerce consumers. Flat fees for postal or courier delivery may be profitable for sending a small item via the Royal Mail, first class. The same fee doesn’t necessarily cover the cost of transporting a bulky item from a warehouse on the southern coast of England to a domestic address in the Scottish Highlands, using a lorry to move it between depots and an overnight courier for the final leg of the journey.

Logistics managers need to understand likely consumer demand at the same time as retail buyers, in order to feed in accurate costs and make provision for responsive fulfilment. And they need to understand it regionally as well as nationally. It’s this information that allows logistics providers and clients alike to manage and measure the effectiveness of their third party logistics (3PL) activity. As client, you can use this data insight to challenge or work with your 3PL to improve efficiency, for everyone’s benefit.

Profitability is everyone’s responsibility in the retail supply process, from marketing right through to end user fulfilment, whether that’s at store or on the doorstep. Strategic and tactical decisions in all these functions need to be informed by the same consumer data insight. It’s a continuous loop of demand and supply that needs data to flow consistently around, reflecting real-time change so that every department can work to the same demand patterns.

THE MERRY-GO-ROUND IS SPINNING: WE CAN HELP YOU JUMP ABOARD

How do you intervene, given the perpetual motion of this carousel of demand and supply? It’s spinning ever faster with the twin pressures of fast-changing consumer habits and fiercer competition. Where can you jump on to the merry-go-round to set the data flow in motion throughout your retail supply process?

At CACI, we have a unique capability to help you jump aboard and infuse consumer data insight into every function in the retail supply continuum. understanding customer behaviour and preferences is crucial at every stage. 

By aggregating small gains throughout the fulfilment process, you stand to make big savings.

We can help you drive value out of data and insight across every business area. From store network strategy to digital channel management, from warehouse optimisation to route planning, we can empower your retail business to deliver goods to consumers rapidly, profitably and competitively across the UK and globally.

We can help make your entire network more efficient and responsive – from stock availability to final metre delivery. Talk to us about driving competitive advantage and supporting sustainable retail growth in the fast-changing world of 2021 and beyond.